Owing to sluggish capacity addition of hydro power projects in the country, the hydro sub group recently had recommended power ministry to declare all hydro power projects as renewable, which the later refuted.

Currently only those projects, having an installed capacity of less than 25 MW, are considered as renewable. As per the re-assessment studies carried out by central electricity authority (CEA), country’s hydro power potential is estimated at 148701 MW out of which only 34664 MW has been developed so far. Forty five (45) hydro projects having installed capacity of 10897 MW (25 MW & above) have been targeted for hydro power capacity addition during the 12thPlan, out of which 534 MW has already been commissioned till date. This slow growth of hydro power is attributed to the fact that hydro power projects have high capital costs, longer gestation periods and higher risk in implementation. Along with this inflated excise duties on steel, cement and service tax on construction services further adds to project developer’s woes.

A favourable consideration to the hydro sub group’s recommendation by the power ministry would have exacerbated the present situation of the REC market. Obligated entities would then have easily met their obligations by simply purchasing hydro power and eventually shying away from purchasing RECs from the market. This would have reduced demand of RECs further. The power ministry also refuted the rationale behind the demand for making it mandatory to buy certain percentage from hydro as RPO owing to weak implementation of RPO/REC framework.

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